Jaitley’s anguish

However much Union Finance Minister Arun Jaitley may try to spin a yarn about Indian economy there is very little on the ground to show an upward trend. Soon as the news of bad Monsoon predictions from the Indian Meteorological Department (IMD) spread a nervous Jaitley rushed to discount the apprehensions saying the country has enough buffer stock of food grains to paper over the coming difficult months. He claimed that the only food item which may be affected is perhaps the vegetables. That’s hardly of much significance, in Jaitley’s assessment.

It makes sense for Jaitley to rush because soon as the news spread, the stock market started plunging and therefore as the custodian of the nation’s wealth the Finance Minister had to reassure the investors to ignore Weather forecast.

But much before the IMD forecast, the foreign investment in India started taking a flight back home. The Indian Express reported on June 4, 2014, that foreign investment declined by 40 per cent by March this year compared to corresponding period last year which means the process started only after the NDA government assumed office on May 26, 2014. The paper reported that foreign capital, in India was of the order of 3.53 billion US dollars in March, 2014. But by November, 2014 (after the advent of Modi-Jaitely regime) it touched an all-time low of US $ 1.53 billion.

There was some cause for the foreign investor’s concern about the state of Indian economy for we have it from none other than Reserve Bank of India (RBI) Governor Raghuram Rajan that the economy is far too weak to for him even now to cut any further interest rates and force the cautious Indian middle class to turn towards the market instead of safely depositing his earnings in a Bank. Actually one of the factors why foreign investor has been parking his money in India of late, and in particular during the UPA regime was that Indian banks pay the highest interest rates and soon as the foreign investor would see his gains turning into losses he would want to scamper and that’s what he seems to be doing.

For on the ground there is not much to match the loud claims made by Jaitley and his master Prime Minister Narendra Modi on the buoyancy of the Indian economy. The Economic Times reported the same day on its front page,“A mid-cap and small-cap meltdown, Sensex extends its losing streak, falls 351 points.” The news item reported 35.5 % fall for Unitech, 20.60 % fall for Jaiprakash Associates, 12.36% fall for Hindustan Constructions Ltd, 11.34% fall for Reliance Power, 10.75% fall for Adani Power and 9.36% fall for Suzlon.

It also showed -12.08% trend in Reality sector, -3.85 in FMCG, -10.09 in Sugar, -1.65 in Cement, -7.66 in Power, -1.79 in Oil and Gas and -0.72 in Construction sector.

Simultaneously the same Economic Times compared alongside on the same page the big ticket projects on the ground stalled or altogether abandoned since the arrival of the NDA government as against the same during 2013-14. Thus while in the previous year the number of stalled projects were 341, these went up to 363 in 2014-15. Similarly while 69 projects had been altogether abandoned the previous UPA Government in 2013-14. This number went up to 101 under the NDA rule in 2014-15.

Interestingly while Modi-Jaitley duo may keep harping on the delay in passage of its Land Acquisition Bill for the projects being held up, the report shows that of all the 59 projects thus abandoned or stalled only three are held up due to Land Acquisition obstacle. Of the rest, seven are held up for lack of environmental clearance, seven for unfavourable market conditions, six for lack of funds and another six for lack of promoter interest and 14 for other reasons like legal disputes etc.

Of course it is obvious that RBI Governor’s utterances are poison to the Finance and Prime Ministers. But seeing this situation could anyone really disagree with Rajan?